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Equity Release - what you need to know

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What is Equity Release

The equity in your property is the value of your home, minus any mortgage you may owe and any other secured borrowing. Many people leave equity tied up in their property throughout their lives. However, more and more people (over the age of 55) are now choosing to release some of this equity and turn it into a lump sum of money whether this be to allow home improvements, travel, parents helping their children financially or for improvement to standards of living generally.

2017 Equity Release Figures

New figures from the Equity Release Council have revealed that a record quarter for equity release activity in Q4 2017 fuelled annual lending growth to its highest since 2002.

According to the data, lending via equity release plans in Q4 2017 amounted to over £838 million. As a result, the total amount of housing wealth unlocked by over-55 homeowners reached £3.06bn in 2017 – up from £2.15bn in 2016 and the first time it has exceeded £3bn in a single year.

The final three months of 2017 also saw an unprecedented number of new equity release customers, exceeding 10,000 for the first time in a single quarter.

These increases meant the total number of new equity release plans agreed in 2017 was 37,037 which was up 34% from the 2016 figure of 27,563.

The 2017 figures are the highest total on record and the biggest percentage rise since 2003.

What is an Equity Release lifetime mortgage?

A lifetime mortgage is a special type of loan which is usually designed to run for the rest of your life. This means that the money you borrow is secured on your home to give you a lump sum and / or regular income depending on the type of loan you require. The amount you owe to the lender is usually paid back from the proceeds of the sale of your home after death. If you are borrowing as jointly with another person, this would be after the death of the last borrower. Any monies then left over would be paid to your beneficiaries under the terms of your Will.

Before applying for equity release, you may wish to assess whether there are other better ways to improve your financial situation and therefore we advise that you should always seek advice from an Independent Financial Advisor.

Summary of Important risks to be aware of:-

  1. Repossession – the lender will have a right to take legal action to repossess the property should certain circumstances arise.
  2. Negative Equity - Should this occur, you or your estate will usually be required to repay the mortgage debt in full. Some lenders have a “no equity guarantee” to protect against this.
  3. Moving Home – you will need the lenders consent to transfer the lifetime mortgage to a new property.
  4. If you move into long term care - If you (the last borrower) move into sheltered accommodation, a residential care home or enter into long term care, the lifetime mortgage must be repaid, which may require the property to be sold.
  5. Another party moving into the property - If you want another person to move into the property (this includes a family member moving in as a carer) you must first obtain the written consent of the lender.
  6. Your tax and welfare position - A lifetime mortgage may affect your tax and welfare benefits position. You should consider seeking advice on this.
  7. Further borrowing – You may not be able to secure any other loans over the property.
  8. Estate Proceeds - You might wish to discuss the matter with your heirs/beneficiaries due to the reduction in the estate proceeds upon death.

I am interested in releasing some equity . How can Chatterton’s help?

If you are looking to proceed with Equity Release and need to instruct a Solicitor to act on your behalf please contact me or one of our Equity Release specialists today for a free no obligation chat. We are happy to provide fixed fee quotations upon request and talk you though the process.

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